Before Coins: Credit, Tallies and Clay

Ask most people where money came from and they will tell a story about barter. A farmer has grain and wants shoes; the shoemaker has shoes but wants fish; nobody can find the right partner, and so, after much frustration, everyone agrees to use some convenient commodity, perhaps silver, as a go-between. The story is tidy and intuitive. It is also, as far as the evidence goes, mostly imagined.

The story we were told

The barter tale has a distinguished author. In the fourth chapter of the first book of The Wealth of Nations (1776), Adam Smith describes a butcher, a brewer and a baker who cannot complete their exchanges because each wants something the other lacks. Money, in Smith’s telling, solves this “double coincidence” problem. Generations of textbooks repeated the scene.

Anthropologists went looking for the barter economies the story requires and did not find them. In a much-cited article of 1985, the Cambridge anthropologist Caroline Humphrey concluded that no example of a pure barter economy had ever been described, let alone one from which money had grown. Barter certainly exists, but it tends to appear between strangers, or after a monetary system has broken down, not as the original condition of economic life.

What the record shows instead, again and again, is credit: arrangements in which one person gives now and another owes later, with the debt remembered by the community or written down. Among neighbours who will meet again, this is far more practical than haggling over shoes and fish.

Tokens, envelopes and the first written accounts

The oldest evidence of systematic record-keeping is made of clay. From around the ninth or eighth millennium BC, people across the Near East used small shaped tokens: cones, spheres, discs and cylinders, each apparently standing for a quantity of a particular good. The archaeologist Denise Schmandt-Besserat, who catalogued thousands of them, argued that they were a counting system for goods such as grain and livestock.

By the fourth millennium BC, tokens were sometimes sealed inside hollow clay balls, often called envelopes or bullae. A sealed envelope could not be tampered with without breaking it, which made it a kind of receipt. But it had an obvious inconvenience: to check the contents you had to smash it. So accountants began pressing the tokens into the soft surface of the envelope before sealing it, leaving a visible record of what was inside.

Schmandt-Besserat’s argument, which remains influential though not universally accepted in every detail, is that this habit led to a decisive step. If the marks on the outside carry the information, the tokens inside are unnecessary. Flat tablets with impressed and later incised signs took their place.

What the tablets counted

Among the earliest writing anywhere, the proto-cuneiform tablets from the city of Uruk in southern Mesopotamia, dating from around 3200 BC, are overwhelmingly administrative. The tablets record barley, beer, sheep, textiles, land and the rations owed to workers. They were produced by large institutions, temples and palaces, that collected produce, stored it and redistributed it.

It is a striking fact worth pausing on. Writing, one of the most important inventions in human history, seems to have been developed in large part to keep accounts. Literature, law codes and letters came later. The ledger came first.

Silver, barley and debt in Mesopotamia

By the third and second millennia BC, Mesopotamian scribes measured value in two main ways: in barley, which people ate and paid as rations, and in silver, weighed in units called shekels. The shekel was originally a weight, not a coin. Silver changed hands in pieces, rings and coils, and was weighed on scales when payment was due.

Much of the time, however, silver did not move at all. It served as a unit of account, a way of stating what a debt was worth, while actual settlement might be made in barley, wool or labour, or postponed until the harvest. Tablets record loans, their due dates and the interest charged. Contracts were witnessed and sealed with cylinder seals, small carved stones rolled across the clay to leave the impression of their owner.

The Laws of Hammurabi, the Babylonian king who ruled in the eighteenth century BC, include provisions on loans of grain and silver, on interest and on what happens when a harvest fails. Rulers in the region also issued occasional decrees, known in Akkadian as mīšarum, that cancelled certain kinds of debt and freed people who had been pledged as security for them. Debt was common enough, and dangerous enough, that it was a matter for kings.

A stick split in two: the English tally

Move forward three thousand years and a very different society found a strikingly similar answer to the same problem. In medieval England, the royal Exchequer recorded payments using tally sticks, usually of hazel or willow.

The method was simple and clever. A clerk cut notches into a squared stick, with notches of different widths and shapes standing for different sums. The stick was then split lengthwise through the notches. One part, the longer stock, went to the party who had paid; the shorter part, the foil, was kept by the Exchequer. Because the grain of the wood was unique, the two halves fitted together only with each other. Neither side could add a notch to its half without the mismatch being obvious when they were rejoined.

The Dialogue concerning the Exchequer, written around 1179 by Richard FitzNeal, the king’s treasurer, describes how the notches were cut and what each width meant. Tallies were not only receipts. The Crown could issue a tally against revenue it expected to collect in future, and the holder could present it to the official who owed that revenue. In practice, tallies were sometimes passed on to others, so that a record of debt began to behave like a means of payment.

The system lasted an astonishingly long time. The Exchequer stopped using tallies only in 1826. Eight years later, on 16 October 1834, workmen were ordered to dispose of the accumulated old sticks by burning them in the furnaces beneath the House of Lords. The fire spread, and most of the medieval Palace of Westminster was destroyed. The Parliament building that stands there today was built to replace it.

Money as a measure of debt

In 1913 a British diplomat named Alfred Mitchell Innes published an article in The Banking Law Journal under the plain title “What Is Money?”. He argued that the barter story had it backwards. A sale, in his view, was not an exchange of goods for a commodity called money but an exchange of goods for a credit, a claim on someone else. Coins and notes were simply tokens of such claims.

The article was largely forgotten for decades and then rediscovered by economists and anthropologists interested in the credit theory of money. David Graeber’s widely read book Debt: The First 5,000 Years (2011) built on it and on the Mesopotamian evidence to argue that credit systems came long before coinage.

Not every economist accepts the strong version of this argument. Commodity money, from silver to cattle, clearly played a role in many societies, and the boundary between a weighed piece of silver and a unit of account is not always sharp. But the weaker claim is hard to dispute: for most of recorded history, a great deal of economic life ran on remembered or recorded obligations rather than on objects passing from hand to hand.

Why this matters for digital cash

This history is not just background. It changes the question we ask about any new form of money. If money is, at bottom, a system of records about who owes what, then the most important questions are about the records themselves. Who keeps them? Who can change them? How do two parties who do not fully trust each other agree that an entry is genuine?

The Uruk scribe, the Exchequer clerk and the split tally each answered those questions in their own way. The temple held the tablets; the king’s officials held the foils; the wood’s grain prevented forgery. Every later system, from the bank ledger to the shared ledger described in the Bitcoin whitepaper of 2008, is another answer to the same questions. We will meet several of them in the essays that follow.

A note on evidence

Dates for the earliest tokens and tablets are approximate and are revised as excavation and dating methods improve. Where we give a date with “c.” in this essay, it reflects the range most commonly cited in the scholarly literature listed below, not a precise year.